A123 Systems: A New Lithium-ion Battery System for Electric and Hybrid Cars

Abstract

A123 Systems, founded in 2001, is a company built on green energy storage technology, using proprietary Nanophosphate® technology to produce lithium-ion batteries for use in portable tools, electric cars, and electric grids. The company’s main competitive advantages lie in its access to proprietary technology licensing from MIT, production facilities located in or close to potentially vast markets (the U.S. and China), joint venture agreements, partnerships and alliances with main players in the automotive market, and access to lucrative government grants and loans in the U.S. The company’s short ten-year history exemplifies both the benefits and risks inherent in nascent industries. Strategically, A123 must balance overhead, production, and development costs against revenues received within an undeveloped market. While government incentives abound within this newly emerging industry, the company must align strategy and operations with the realization that these incentives will not always be available to subsidize its operations. In addition, A123 will have to make important decisions with respect to utilizing and diversifying the application of specialized advanced technology in order to minimize or forestall many of the risks it may face in the future.